Monday, April 26, 2010

Mitel's IPO - Quiet Re-Entry

Last Thursday, Mitel re-entered the public market, a move that has been coming since January. I was away that day and since getting back, I've been wondering about the relatively modest buzz around the news.

I'm not really sure what this means, but aside from a few posts and short articles saying little more than the basic news, I just haven't seen or heard much out there. Being Canadian, I have good reason to wave the flag, and if all I do here is create some new awareness of their IPO, I've done my job. I'm a long-time fan of Mitel, and the IPO is another step along the way for them to become a major player in the ever-evolving business communications space.

This isn't the place for an assessment of the IPO's financial merit, but the timing is about right. When they acquired Inter-Tel, that company actually went from being public to private. As I've written previously, the idea was to consolidate and integrate the two companies privately, where the fine tuning wouldn't be scrutinized by investors. Now that's done, and the markets are looking stronger now.

On paper, that makes sense, but their IPO happened to come out on a crowded day with many other IPOs, and that likely cut into their coverage. Price-wise, the stock listed below expectations, and is currently down a bit from its opening price of $14. These things are bound to happen with IPOs, and I wouldn't worry too much about the price right now. The intention is to pay down some debt and be liquid enough to make acquisitions and keep up with the competition, which is considerable. Mitel doesn't have a strong track record of profitability, but they're certainly viable, and should now be in a good position to generate positive earnings.

The IPO sends a message to the top tier competitors - namely Cisco and Avaya/Nortel - that they're a strong alternative for their customers, and it's another way to put some distance between themselves and the crowded space of middle/smaller players vying for this business. And then there's the cloud thing - Google, but also Microsoft. I've been writing about this a fair bit lately, and I think it's going to become a major battleground for all business communications vendors in 2010. Mitel has been moving in this direction for some time, and partnerships with VMware and Sun go a long way to keeping them competitive here. Not to mention their recent moves in mobility, especially Mitel Mobile, which looks to be pretty unique among vendors in this space.

For now, I'm going to ignore the stock price and focus more on how the IPO helps raise Mitel's profile with customers and channels as well as put a deeper stake in the ground with their competitors. There's a lot to like about this company, and if the IPO can help with the latter here, the price and profits will take care of themselves.


Anonymous said...

The Mitel IPO was a disaster. Investors aren't fooled by the hype and look at the financials which are deteriorating

Bobby said...

I hope you're right about Mitel. There are a good number of businesses with Mitel systems in the U.S.